While each of the strategy may not fit into your trading systmen but, some of these rules could help traders limit the drawdowns in their trading capital.
- Make protection of capital your number one priority, not your profits. It is much easier to be profitable when you don’t lose a lot of money.
- Try not to lose more than 2-3% of your total trading capital on any one trade.
- Avoid taking multiple positions that are all closely correlated to the same trend.
- Only trade your highest probability entry signals.
- Do not become biased as a bull or a bear. Stay open minded to what the markets and your signals are saying about the current trend.
- Make sure you don't have more than 2-3 positions open at a time, so even big whipsaws in price action do not damage your account too much.
- Only trade markets you are very familiar with, and have done excessive research on with charts and backtests.
- Trade only a method you fully understand.
- Trade smaller and smaller during losing streaks, and only get back up to full size during winning streaks.
- Use option contracts to cap possible maximum losses to only the contract size.
Happy Trading
Multiplier Wealth
Very energetic blog, I liked that bit. Will there be a part 2?
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